PayPal India Debacle: How a Friend Became a Foe

It was 8 am when I wake up. A gentle gush of wind came filtering in through a half-open window, and with it came flickering sunlight of cool February morning. I woke up. Stretched my limbs, and went ahead to grab today’s newspaper instinctively moving towards my personal computer to check my mail while calling my wife for a cup of strong tea. I opened the mail, fed in my username and password, and boom. I was flat on my chest gasping for air. It was hard for me to control the cup I was holding, I almost threw it aside—PayPal has done it.

All the payments I was expecting to reach my Indian bank account today was reversed and sent back to the clients who made the payment. All the money I earned in the last one month was gone. It is just the beginning of the month. How will I pay my bills? I was terrified, and hastily called up PayPal customer service; good lord, I was greeted by a machine asking me to call on Monday, if I want any real help.

For two days, I have to contend with depleted bank account and a negative credit card balance of $2,500. $2,500 may not be a lot of money for some people, but you know it and I know it too, it is a heck lot of money for us. And now it is gone without any trace whatsoever. I am trying whatever I can: calling PayPal, searching Google, reading forum posts, reading RBI guidelines, etc,. I don’t know what else to do.

Did I tell you that PayPal has confirmed that the last transaction has been successful, but still I have not received any money?

This is not just an anecdotal tale of my suffering; rather, this tale more or less summarizes the story of every freelance worker and small in-sourcing company that depends on PayPal for their cross-border financial transactions. It raises several questions in my mind:

  • Why Paypal delayed information on reversals?
  • Why an standard copy paste reply to all, it’s looks like we are misguided?
  • Why Transfer To Bank Account Status shows completed, where as no money reaches to our bank?
  • What will be PayPal’s stand on negative balances and what will be their policies to restore the same?
  • Who will pay for losses incurred for charges and Forex conversion at the time of payment reversals?
  • And above all how they will restore their trust with Indian account holders?

Even though Paypal is not a bank, It’s Paypal’s fault that they took such dramatic decision overnight without any prior notice. It seems Indian users are unnecessary harassed, who will pay for inconvenience caused to them in terms of loss of profit, bearing unnecessary mental trauma and business insecurity.

It’s an surprise reversals for us, even though:

  • We have a proper Tax ID (Pan No.) which is duly updated at Paypal
  • All transactions at Paypal has been added to our books of account.
  • Our Bankers are registered at NEFT, also a Bank controlled by Government of India, not a private bank.
  • Our bankers has IFSC nos. so no question of any statutory compliance issue which Paypal and RBI.

What happened?

PayPal claims that the company is having some technical glitch (a certain no) some one said it’s an issues with its “Business partners” and RBI regarding personal payments, so they are reversing the personal payments. But the fact of the matter is they have reverted every single penny earned by an Indian service provider, even though it is against an Invoice for Goods and Services.

Not only that, many people have complained that their PayPal account is showing that the money has been transferred, but they have not received any money in their bank accounts till now.

Where did all the money go and why it is still in the air?

On Monday I will be visiting NASSCOM’s office as well as try to get feedback from RBI as my bankers already requested to provide information if NEFT is holding the payment issued by PayPal?

Is it a racial discrimination?

No. Impossible, I do not think so, regardless of what other thinks. But, indeed it is an economical discrimination. It is not the big companies of India as well as the United States that are suffering; it is the small service providers of India, whose life depends on the earnings from freelance works.

It is an economic discrimination!

Who is involved?

Everyone is. Well at least those people who render small services to small to medium size businesses in the UK, and the USA.

Not everyone out here is rendering thousands of dollars of services to clients in far off countries; a large number of people take small assignments. Will it be feasible to ask each one of your client to go to bank, fill the form, pay service charges, and wire the money to you in India? It may be for you, but I am sure my clients will not do that, and if somehow they are made to do that, they will leave me. Thus, for people like me the only solution was PayPal, which at present has gone awry.

I wonder if something else is happening behind the curtain!

The who suffer most are work from home workers, small companies you may call them as an “unorganized ITES ( IT Enabled Services )” sector.

What about PayPal?

Well first and foremost, PayPal is an economic entity that has a sole motive of doing business, so it will not want to rob off its customers.

Then what is the issue?

A possibility and assumption: Issue is Indian banking system and Indian law regarding inward and outward movement of foreign currencies, which is not very business-friendly. India has a quite a stringent foreign currency act in place that makes the movement of foreign currencies difficult, and since Paypal allowed Indian sellers to verified by their Bank Accounts puts it in strange position and as I can see it this could be the reason behind the current crisis.

This is the darkest hour in the history of outsourcing!

The question I would like to ask with PayPal’s Management is exactly where is the fault of Indian account holders or what have we done wrong, or they really deserve such pathetic treatment as well as issuing refunds of their hard earned money without any notice?

Why?

Quote: RBI has no control over PayPal and it cannot monitor every PayPal transaction, and nor can Indian government, it becomes a potent source of money laundering or terrorism funding, as PayPal allows anyone with an account in Indian bank to open and verify their PayPal account. This policy has rubbed the RBI just the wrong way.

Let’s say, I live in India and I open an account in the US account—anyone can do that even without setting ones foot on the US soil—and I start playing with the money. Who will notice it? Who will control it? No one.

Not at least till the money touches the Indian soil in any legitimate bank account. If money transferred to any Indian Bank, it’s legitimate and legal because no company account can be opened without registration details or personal account can be operated without PAN No. which is also a tax identification no. So I am ruling out this possibility.

This was a big loophole in the PayPal system, which needed to be plugged. But, wasn’t there any other way? It is hard to believe.

Why not make opening a bank account a little more stricter in here?

What should be done?

There is very little that we can do! All we have to wait and watch, but we must file a claim with paypal, why money is refunded and why a negative balance created if we don’t have funds in our bank accounts?

The question is how they will restore negative balances and how they add funds to sellers account?

This incidence, if prolonged for days, will weaken the trust of Indian people in PayPal, and its sister companies like eBay, Skype, etc. And even if we assign a value of mere $1 to the trust of each Indian, then PayPal will lose $1 billion in revenue.

Blocking Indians do not make business sense for PayPal!

It is hard to understand why PayPal, the oldest payment processing system in world is offering lame excuses like internal problem, system glitches, issue with banks, etc. And why it is not doing something to resolve it soon?

For the leader of a pack, it will be not that hard!

What’s the alternative?

On the face of it, services like moneybookers, AlterPay, Xoom, Payoneer, etc. look like good alternatives, but think again: what is the reason they will not go the PayPal way? After all, they are also dependent on NEFT. We should embrace wire transfer, but will it be viable for small freelancers?

But please consult your Chartered Accountant (Similar to CPA) and read the RBI circular stating that NEFT can not be used for Foreign Inward Remittance, before you signup with any other service.

Let’s call our clients, and fellow freelancers, and join hands to crush the ugly head of “economic control” and those behind it who want to steal from us an opportunity to earn our living. We get clients because we give better product.

What now?

This question has given many sleepless nights to everyone who depends on PayPal to pay their monthly bill. And to those who has negative credit card balance of thousands of dollars due to this? There are many such questions that need answers, and more than answers they need the solution. I hope, PayPal will understand this and will solve the issue as soon as possible. Until then we cannot do much except trusting PayPal, and waiting for things to turn our way.

In this tough time, Patience is the key!

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